HomeInsideSBI report: Retail inflation may average at 4 percent in FY20

SBI report: Retail inflation may average at 4 percent in FY20

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Surplus rainfall in August and September is likely to keep food and vegetable prices elevated going forward, and retail inflation may average at around 4 percent in FY20, an SBI research report said.

In October, inflation based on the Consumer Price Index (CPI) spiked to a 16-month high of 4.62 percent on costlier food items.

In 2019 five states- Rajasthan, Madhya Pradesh, Maharashtra, Gujarat, and Karnataka bore the brunt of excess rainfall and were affected by severe floods.

The surplus rainfall during August and September seriously damaged many Kharif crops.

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“Going forward, thus, food and vegetable prices could remain elevated, and inflation prints in November still may be on a higher side due to the low base in 2018. We expect FY20 CPI to now average closer at 4 percent,” SBI research report- Ecowrap said.

In the fourth bi-monthly monetary policy announced in October, RBI had projected at 3.5-3.7 percent for H2 of FY20 and 3.6 percent for the first quarter of FY21.

The report said even as food CPI will remain elevated, core CPI will go below 3 percent in this fiscal.

According to the report, RBI may cut repo rate in the upcoming December monetary policy meeting and may pause thereafter on concerns over inflation.

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“We expect a December rate cut, but beyond December, it will be a close decision (as inflation prints beyond October will remain elevated). Thus, it will be better if the rate cut is front-loaded in December,” the report added.

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Krishna Mali
Krishna Mali
Founder & Editor of TechGraph.

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